Peter Obi blames low reserves on refusal to save during oil boom

Commends disbursement of N5bn to MSMEs
Former Governor of Anambra State, Peter Obi, has blamed low foreign reserves on the refusal of the Federal Government to save during the many years of oil boom.

Obi spoke at the 35th International Conference of the Nigerian Association of Petroleum Explorationists (NAPE), which ended last week in Lagos.

Speaking on: “Changes in Global Oil Price and Impact on Nigerian Economy – Lessons from the Recession,” he said: “Efforts by the Federal Government to attract foreign investments are being hampered by Nigeria’s low reserves of just $30billion. You cannot get people to come into this country today with the reserves that we have.”

He argued that Nigeria’s slide into recession is a direct consequence of the refusal to save, and described the country as the only solely dependent on the extractive industry that failed to save during the period of boom.

He continued: “Mexico with a population of about 130 million has a GDP of $1.3trillion; Indonesia has a GDP of $1trillion and reserves of $102billion; while Turkey, with a population of 80 million and GDP of $800million, has reserves of over $100billion. However, Nigeria with a population of over 170 million, has GDP of $400 million and reserves of only $30billion.”

He linked the nation’s recession to dependence on oil, stressing that recession started in Q1 2016, when oil sector GDP dropped 4.8 per cent, while the non-oil sector dropped by only 0.8 per cent, with the country’s overall GDP slumping by 0.67 per cent.

Obi recalled that Nigeria’s condition worsened in Q2 2016, as the oil sector GDP dropped by 11 per cent when the non-oil sector GDP and the country’s overall GDP dropped by 0.38 per cent and 1.67 per cent, respectively.

“Recession was deepest in Q3 2016, when oil sector GDP dropped by a whopping 23 per cent even though the non-oil sector GDP was positive. Nigeria started coming out of the recession in the second quarter of 2017, when the oil sector GDP became positive by 3.5 per cent, with overall GDP rising by 0.72 per cent. By Q3 2017, oil sector GDP rose by 25 per cent, pushing the overall GDP further positive by 1.4 per cent, even though the non-oil sector was still negative.

“Today, we are coming out of the recession but I can tell you that it is still very fragile. You still have the debts increasing at both national and sub-national at a level that is unsustainable. Our debt-revenue ratio today is about 60 per cent and is still going up. States are borrowing as if there is no tomorrow; Federal is doing the same thing and it is a crisis,” Obi said.